Australian Broker magazine Issue 7.22

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ISSUE 7.22 November 2010

Competition crisis could herald new dawn

Advantedge vision NAB backing leading to new levels of broker support Page 2

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Ready for NCCP?

Last-minute challenges in the lead up to 1 January Page 6

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Rate shock

Leading brokers react to major bank rate moves

Brett McKeon

 AFG Home Loans

could emerge as the new Aussie: McKeon Competition will take at least half a decade to rebuild following a GFC-induced reduction, though the current competitive strata may pave the way for new competitors to emerge.

Australian Finance Group’s managing director Brett McKeon said the current state of competition may leave the door open for smaller players like AFG Home Loans – a separate entity to AFG – to emerge as serious contenders to the dominant major banking institutions.

McKeon said the group had been “collecting cash for the last 12 months, on the basis that we want to take advantage of the situation we are all in at the moment… We see there are a lot of opportunities at the moment,” McKeon said.

“When there are big holes in the market like there is now – a real lack of competition – that always creates opportunity.”

It was the banking crisis in the early 1990s – and the requirement for banks to shore up their balance sheets by collecting extra margins on their loan books – that saw the emergence of Aussie Home Loans as a serious competitor. McKeon argues AFG Home Loans could be next. “There is more of an

opportunity for AFG Home Loans to emerge through this period.”

Though the group is expected to announce details of its expansion plans within a month, it will face a “stalling” mortgage market, likely to suffer a further hit as a result of a shock Reserve Bank of Australia 0.25% cash interest rate rise in early November.

AFG recently reported its worst October in four years, arranging $2.2bn in mortgages, down 17.5% on the same month last year and 4.3% on the already “subdued” month of September. NSW was the worst affected state, with a 13.1% month-on-month fall.

Page 20 cont.

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Page 10

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Inside this issue Opinion 22 A bureaucratic ASIC? Forum 23 Dealing with a stalling market Insight 24 Wendy Higgins’ tips for success Toolkit 25 Cash flow management 101 Market talk 26 Should savings requirements be overhauled?

Caught on camera 29 PLAN gathers to lead and succeed

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Advantedge takes wraps of new services, products Advantedge is putting the finishing touches on a brand new trail book buy/sell facility, a new debt insurance product, and an integrated, business-wide IT platform, as it seeks to leverage new-found strength from NAB’s backing to raise the level of its service offering to brokers.

The buy/sell facility – which is set to go live on 15 November – will see its constituent PLAN, Choice and FAST brokers sell their trail books to Advantedge courtesy of a newly-created, defined valuation model, which the business will then repackage and sell on to its brokers.

With NCCP changes likely to result in up to 20% of brokers exiting the industry according to current estimates, the facility is expected to enable brokers to realise the value of their trail books, and give opportunities to ambitious brokers from the same aggregator to grow through acquisition. The market will also allow Advantedge to keep the books “in the family”. Speaking with PLAN Australia brokers,

Stephen Moore

Stephen Moore, Advantedge Financial Solutions general manager, said Advantedge would guarantee the purchase of trail books based on its new valuation model. The model takes account of revenue sources, book quality (measured by arrears), lender profile, CRM, and any adjustments needed on commissions.

“It will provide an efficient, cost-effective and transparent

What drives trail book value?

Positives

Negatives

Reliable, recurring income stream

Transaction focus

Diversified revenue

Key person dependency

Scalable processes

No diversification

Strong balance sheets

Poor CRM

Quality people

No systemised approach Lazy balance sheet Recruiting family members

market for the buying and selling of trail books, and remove the mystery, emotion and risks associated with third parties,” Moore said.

To assist brokers who wish to buy the trail books on offer, the group is also in the final stages of putting cash flow funding in place.

Moore argued that for the first time, the new market – which will cover 40% of the mortgage industry – would create “certainty” for valuations, which have to date varied between as low as 0.7 times book value, to as high as two times.

In addition, Moore unveiled further details on the emerging Advantedge Financial Solutions offering, which he said is “dedicated 100%” to driving “hard dollar value” for its brokers.

The group will launch a tailormade “loan protect” or debt insurance product in November, which it will offer to its brokers as an add-on to the home loan transaction, as it seeks to push diversification. Designed by reinsurer Swiss Re to Advantedge’s specifications, the product – with cover up to $750,000 – will be sold by brokers who can either refer clients to Advantedge call centre specialists, or choose to embed insurance advice in their own business offering.

The new initiatives are a part of an Advantedge-wide system overhaul, that will see it introduce a new “One Platform” technology suite, built from the ground up, to replace existing PLAN, Choice and FAST systems by the beginning of next year.

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Cannon fires broadside over RMBS support FirstMac managing director Kim Cannon has called on the government to do more to support non-bank lenders, in order to improve competition in the mortgage industry.

Cannon said that the financial support provided by the Australian Office of Financial Management (AOFM) has had “an enormous impact” on sustaining competition, but that more could be done.

“The AOFM support for our sector has been a thorn in [the major lenders’] sides,” said Cannon. “However, I’m hoping [the government] will do more, as the market isn’t fully open yet: while there’s liquidity and you can get funding, pricing’s still an issue – and being competitive is an issue due to that.”

He was bearish about the outlook for the next few months, too, especially considering continuing global economic uncertainty. “There’s still conservatism out there, and investors are few and far between,” added Cannon.

Cannon admitted that funding pressures were impacting FirstMac’s ability to target certain market sectors – such as first homebuyers – but added that new products are in the pipeline.

Similar calls came from Tim Holmes, Homeloans Ltd chairman,

Kim Cannon

who said that the inability of non-banks to make securitisation viable was hurting competition.

“The problem is that what was a major source of funding in the Australian mortgage market – securitisation – is available but it is really not commercial anymore,” Holmes said. “A lot of the second-tier banks relied on that market in order to fund their products – because they didn’t have the balance sheet capacity to do so – and it is very expensive, and doesn’t compete head on with the major banks anymore.”

Holmes said mortgage managers such as Homeloans, which had had “vibrant and successful” securitisation programs prior to the GFC, had been forced to shelve them in recent times.

He argued that the government should issue a “wrap-around” guarantee for RMBS.

MFAA names preferred educators The MFAA has settled on a list of six preferred education providers for finance and mortgage broker training (which is not exclusive).

Following a market-wide tender process and reviews from MFAA members, the association named AAMC Training Group, Institute of Strategic Management, Intellitrain, Kaplan Professional, TAFE NSW, and The National Finance Institute as its preferred providers.

This list of Registered Training Organisations (RTOs) will be recommended to members for all Certificate IV Financial Services (Finance/Mortgage Broking) and Diploma Financial Services (Finance/Mortgage Broking Management) qualifications. Over 20 RTOs submitted a tender.

MFAA professional development executive director Rod Edge said the move to provide a list of preferred providers was designed so that members knew where to go for professional training. The MFAA had received complaints from members who found some providers “not up to scratch”.

“MFAA identified those vendors who closely aligned to a specific set of criteria, including their capability to provide a range of adult learning styles, with the capacity to meet the geographical spread of our member base,” Edge said.

Members will be able to search via the MFAA online portal, to find a provider that suits their needs for content and style of training.

MFAA CEO Phil Naylor said the announced list will be reviewed to ensure existing providers maintain

• AAMC Training Group • Institute of Strategic Management • Intellitrain • Kaplan Professional • TAFE NSW • The National Finance Institute standards, and to assess additional providers for inclusion.

He has also warned members that those brokers who undertake a Diploma from an organisation not on the preferred list could be required to undertake extra training to ensure they reach the level that other preferred vendors have been required to provide.

The preferred provider list comes as the MFAA prepares to introduce its new accreditation requirements and membership categories on 1 January 2011. Under the break down, members will be required to have a minimum level Diploma Financial Services qualification to achieve Credit Adviser (CA) status with the industry body. Currently, 10% of the MFAA’s membership of 12,000 have the Diploma qualification, and the rest must comply within 18 months of the introduction of the new standards.

A ‘fast-track’ option will be available to members with over five years’ experience in the industry.

Naylor hopes the association will not have to “terminate” members for not completing their Diplomas.

When Cert IV was introduced as a minimum requirement, 1,500 brokers were threatened with termination, 750 of which complied.

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Brokers to flock to become credit reps

Mortgage brokers are likely to move en masse to become credit representatives before 1 January, as the full reality of becoming an ACL holder becomes apparent.

Greg Ashe, director of financial services risk consultancy QED Risk Services, said based on the number of phone calls to his business, which specialises in helping businesses to apply for

ACLs, he expects brokers to flock to become authorised as credit representatives.

“I think the bigger aggregators are going to be surprised,” Ashe said. “The bigger aggregators are going to be in a different place by 31 December than what they thought they were going to be say three or four months ago.” Ashe explained that ASIC’s application

Aggregators confident about licence applications Australia’s aggregation groups are confident of obtaining credit licences before the ASIC deadline – despite only two aggregators having been granted licences to date.

Research by Australian Broker indicates that, out of the aggregators operating in the Australian market, only two relatively small businesses – Astute and Australian Loan Company – have been granted ACLs by ASIC.

Broker licensing choice: Connective 20%: credit representative under Connective’s licence

80%: ACL

Advantedge’s general manager for broker platforms, Steve Weston, commented that Advantedge’s licence applications would be lodged in late November.

“Our licence application is well-advanced; it hasn’t been lodged, but we’re happy in terms of our scheduled timeline,” he commented. “We’re aiming to have the application in late November: we could have it earlier, but because NAB will also be applying for an ACL, it makes a whole lot of sense to put the licence applications in at the same time.”

Meanwhile, Connective principal Mark Haron remarked that Connective’s licence applications were being lodged “as we speak”.

“The process is well and truly in hand – we need to apply for a few licences but we foresee the lodgment and application process going smoothly.

However, Lesley Wood, general manager of one of the aggregators to have obtained a credit licence, suggested that the relative lack of aggregator licences granted so far

numbers are one indication.

Having taken 14,000 registrations, the number of ACL applications shows “a lot of inaction”.

Ashe also claims that on the whole the industry is “badly prepared” when it comes to having in place the more “esoteric” aspects of ACL compliance, such as risk management policies, compliance programs and managing conflicts of interest.

“When we are dealing with our non-financial services SME clients, those are the types of things that we are implanting in those sorts of businesses, but the mortgage broking world hasn’t seen it before, and they don’t understand the value that those procedures are going to have to their business over a length of time,” Ashe said.

“In terms of actual preparedness to be licensees, I think the current evidence of our phone calls that we are taking is

showing that the industry has been pretty badly prepared. True to form, they’ve left everything to the last minute,” he said.

However, Ashe has given a vote of confidence to mortgage broker understanding and action on responsible lending principles and requirements under the lending process. But Ashe said there are areas of brokers’ quasi-credit underwriting role still causing confusion, particularly in regard to the low-doc sector of the market.

“We’ve got this awful mismatch between what brokers are required to do and what lenders are required to do until 1 January,” Ashe explained.

“Meanwhile, you’ve got some lenders pushing their low-doc products, and mortgage brokers failing to appreciate that they’ve got a responsibility now to conduct some kind of reasonable verification of a client’s income, even though the lender is not actually asking for it.”

could be a concern. “I’m not at all surprised that we are one of the only aggregators to already have an ACL,” said Wood.

“Many other aggregators just aren’t ready for the new regime, whereas ALCo has embraced the legislation because of what it will mean for the industry – the positive effect it will have on both consumers’ experiences and perceptions of brokers. It was very important to us to fulfil all the obligations of the new Act promptly, to ensure all our members felt supported and at ease with the new legislation.”

Wood also suggested that other aggregators may only be reacting to legislative requirements, rather than planning for them.

“It is really quite concerning that other aggregators are yet

to be recognised with an ACL,” she continued. “It forces you to ask: have they had only substandard compliance support in the past? Is compliance simply not a priority?

“The important question for members of these other aggregators that haven’t yet received an ACL is: What’s going to happen to my business – my livelihood – if my aggregator doesn’t get approved by ASIC?” Kathrine Morgan-Wicks, ASIC’s senior executive for the ‘Real Economy’ team, commented that ASIC is actively working with aggregators and banks to support them through the licence application process, and that ASIC was expecting to see applications from larger entities lodged, in the near future.

Conversations with aggregator representatives also revealed that most brokers had settled on which licensing option they would plump for. Around 70% of brokers in the Advantedge-owned groups will become a credit representative either under Advantedge’s licence or another group’s licence, whereas 80% of Connective brokers have obtained or are in the process of obtaining their own licences.

While AFG is still canvassing members, according to general manager of sales Mark Hewitt, it expects more than half of its brokers to apply for a full licence.

Broker licensing choice: Advantedge

30%: ACL

20%: credit representative under another group’s licence

50%: credit representative under Advantedge’s licence

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ASIC reveals application snafus

The credit regulator has urged licence applicants to apply “as early as possible”, so that any problems with incomplete applications can be ironed out while there is still time before the 31 December deadline for application submission.

ASIC has revealed that close to 20% of applications have been rejected due to insufficient information being provided.

Kathrine Morgan-Wicks, ASIC’s

senior executive for the ‘Real Economy’ team, commented that many of these appear to be simple mistakes, such as not including supporting documents, not completing free-text questions, not applying for the right authorisations. She urged applicants who are in “any doubt” about aspects of their applications to contact ASIC for assistance.

ASIC is also recommending that brokers pay their application fees when completing their online applications, as ASIC will not finalise processing applications until payment is received. Applicants have a maximum of seven days to pay once a completed application has been submitted; payment cannot be delayed pending the outcome of an application.

Morgan-Wicks also clarified the procedure around cancelling credit registrations for newly-authorised credit representatives.

A recent credit update from ASIC warned that if they do not apply to cancel their registration within 15 business days of being authorised,

their authorisation to act as a credit representative will cease to have effect. The requirement applies to all those who are no longer seeking to engage in credit activities in their own right and who have become credit representatives of another registered person or of a licensee.

Morgan-Wicks stressed that ASIC was keen to work with credit representatives that may have overlooked this new requirement, and will assist them to comply.

“We’re making efforts to contact the handful that haven’t cancelled their registration, and are offering them relief if they act now,” said Morgan-Wicks. “We’re also sending reminders with new notifications of credit representative status that they will need to apply to cancel their registered person status – which is easily done via our online credit portal.”

Registrations can be cancelled by visiting ASIC’s credit portal and completing form CS08 (Request to Change Registration Status). Users will need to have their credit registration numbers to hand.

Tips for a successful application • Ensure that you include all necessary supporting documents, especially police checks, credit checks and a business description (a template for this process can be downloaded from the ASIC website) • Ensure you fill in ‘free text’ questions – such as those relating to the qualifications and skills of managers • Ensure you apply for the correct authorisations – if in doubt, contact ASIC to discuss • If you’re a sole trader, check you’ve ticked that you are – otherwise, you could end up paying a higher licence fee If in doubt about any aspect of your application, contact ASIC on 1300 300 630 or visit infoline@asic.gov.au

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More interest rate pain to come Ken Raiss, director of tax and property accountants Chan & Naylor, also expects further increases over the next six months. “There’s going to be at least another 50 basis points added,” said Raiss. “I would hope that the RBA holds off next month, otherwise it’ll have a serious impact on consumer and business confidence. I was expecting a move in December,

so hopefully this is just that move brought forward, rather than the first in a chain of rises.”

The RBA’s decision to increase the cash rate to 4.75% has been heavily criticised by industry.

Reserve Bank governor Glenn Stevens’ reasoning behind the move was that the “balance of risks had shifted to the point where an early, modest tightening of monetary policy was prudent”.

November rate rise: reactions

November’s interest rate increase could be the beginning of a series of rises over the coming months.

Glenn Baker, chief economist at ING Direct, reckons that the cash rate will be increased by a further 100 basis points over the next 12 months.

“The RBA has clearly taken a long-term view with this month’s rate increase,” said Baker. “The medium term story hasn’t changed from the RBA’s viewpoint, in terms of strength of the economy – if anything, the timing’s come forward.”

However, Baker suggested that future rises may be “spaced out”, rather than carried out in rapid

succession – especially as lenders hike mortgage interest rates over and above the RBA rate rise.

“I think we’ll see a slower rate of increase so that the effect on the economy can be monitored.

I’d also suggest that we won’t see any further moves until February, as another move in December isn’t very palatable, and there’s no meeting in January. It might even be longer than that, as the impact on the retail sector and mortgage holders will be amplified by independent bank rises. Even so, people need to think of this rise in the context of a commencement of a restrictive phase of interest rates.”

• “This decision just puts more pressure on Australian households in the lead up to Christmas. The RBA’s previous rate increases have already had a major impact on economic activity. Millions of Australians are also struggling with the cost of everyday goods as well as services such as power and water. Our sector would benefit from the RBA leaving the official rate alone until the first quarter of 2011.

Dean Rushton, chief operating officer, Loan Market • “If the RBA had accurately assessed market conditions it would not have increased interest rates. As well as seeing a softening of the housing market, we are experiencing a very concerning and continuing decline in housing affordability. Although just one component of the solution to housing affordability, lower interest rates are needed to reduce the proportion of income that Australians are spending on loan repayments in an effort to improve the worsening affordability situation – this is what the RBA should be focusing on.

David Airey, president, REIA • “Australian families have absorbed enough budget pain recently, due to the higher cost of living from utility bill hikes and the October to May rate rises. These six loan repayment increases equated to around $300 per month for an average $300,000 loan. Many borrowers took on even more. Today’s move will hurt many mortgage holders. It may even lead to a significant number cutting back on spending that is important to their wellbeing, in order to cope. Michael Russell, CEO, Mortgage Choice

Brokers ‘disappointed’ with bank rate moves Leading mortgage brokers have expressed discontent with CBA’s decision to raise variable rates by beyond RBA cash rate rises, and expect more work to manage client expectations.

First Street Home Loans’ Jeremy Fisher said he is “extremely disappointed” with CBA’s decision, which came after the Reserve Bank upped rates by 0.25% to 4.75%. CBA chose to raise variable interest rates by 0.45% to 7.81%, citing funding costs as the rationale.

“It’s going to create a lot more work for us brokers, because clients will want to shop around and talk with their feet,” Fisher said. “I had a multitude of emails within a couple of hours from clients wanting to look elsewhere and see if there are other options.”

He said the move would impact brokers who had been supporting

the likes of CBA. Intelligent Finance’s Justin Doobov said the move created “a lot of anxiety” among clients with CBA loans, and who were still waiting on other bank announcements.

However, both Fisher and Doobov do expect other major banks to follow suit in the near future by raising their variable rates higher than the official RBA cash rate moves.

The result will be more work managing client expectations, Doobov said. “A lot of clients are saying ‘Why did you recommend CBA?’, and we are having to explain to clients that the other banks haven’t made their announcement yet, and they are expected to move too. But also the reason we chose CBA wasn’t just because of the interest rate – there are so many other things that came into play as to why

CBA was chosen as a lender.”

Fisher and Doobov said the moves by the major banks will open the door to competitors, but both are being cautious in their recommendations to clients.

“I think the second-tier banks and white labels are fine as a comparison, but the issue is going to be timing and turnaround,” Fisher said. “The banks can do the business, so if they [smaller lenders] are potentially going to get swamped, they are going to lose on the customer service proposition.”

Doobov said “you get what you pay for … If you get something cheap, you’ve got to make sure it’s not just one box that you tick; it’s got to satisfy the other factors you look for in a loan.”

Intelligent Finance has actually capitalised on the moves, by encouraging fixed rate uptake by

clients over the past six months, Doobov said.

“What we’ve done over the last six months is we’ve spent a lot of time contacting clients in relation to fixing their interest rate, so while we have got a lot of phone calls and emails from clients asking what to do, on the other side we’ve had emails from clients saying thanks,” he said.

Jeremy Fisher

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Diversifi eyes WA brokers give Eastern expansion thumbs up to Macquarie 2.0 WA finance broking business Diversifi has set its sights on opening two more shop fronts during the next 12 months, and may target new markets on the east coast of Australia.

Director Julie Ryburn, a former chief operating officer and partowner of Choice Aggregation Services, said the group’s expansion plans follow success of its model since January 2009.

Currently, the business operates under the “Diversifi” banner in two locations in the Perth market.

Ryburn said the planned new shop fronts will follow a quasi-franchise model that will seek to replicate the success of the business model and brand so far in the Western Australian market.

Diversifi formerly operated as Choice Home Loans, but rebranded in 2009 after diversifying its offering beyond finance to include related products and services, including insurance, accounting, financial advice and settlements, as well as a range of additional and related services that mortgage clients may require, such as removalists, security, cleaners, plumbers and electricians.

Ryburn said that mortgage broking has now become the “foot in the door” with clients, and that the ability to provide a broader suite of services had built a diverse revenue stream.

“That’s part of the Diversifi model,” Ryburn explained.

“Commissions have dropped substantially, so on the broker’s

Julie Ryburn

side they have a diversified income range coming in – it’s not just focused on mortgage lenders. If we have another income stream coming in for them, then if commissions were to drop further, they have a supplement,” she said.

The business process for appointing referral partners is “stringent” Ryburn said, and requires a service level agreement.

Diversifi has a panel of referrers in some market segments.

At present, the business has 10 loan writers, and 14 staff altogether, including Ryburn, and the other two founding directors, Rose De Rossi and Tracey Gilbert.

Ryburn said she recommends diversification to other brokers, and that the biggest challenge was changing their “mindset”, arguing that brokers should look at where they want their business to be in five years, and view themselves as broader finance specialists. “The way we present the services we offer, they aren’t just mortgage brokers now,” she said.

Aussies lie to get credit, says Veda One in 10 Australians have misrepresented their financial status in order to obtain credit, according to a new survey from Veda Advantedge.

Veda’s latest Australian Debt Study Report reckons that 1.6 million Australians have ‘misrepresented’ their financial information when applying for a loan. It reckons that over 800,000 understated their expenses, nearly 350,000 overstated their income, and almost 400,000 understated the amount of money owed on credit cards.

Chris Gration, head of external relations at Veda Advantage, said it

was “alarming” that some Australians were still able to misrepresent their finances.

“Brokers are at the coalface with this issue, and are probably more aware than most that consumers will sometimes mislead you – occasionally significantly.”

He suggested that not only was it in brokers’ interests under responsible lending to carry out further credit checking, it would also help increase approvals.

“Check the list of credit enquiries on the credit report against the liabilities reported to you: if there are discrepancies, then that’s a sign that further information will be

Macquarie Bank’s return to the market is being received positively, according to the bank.

Feedback given to Macquarie Bank on its recent broker roadshow in Western Australia has indicated that brokers are impressed with several aspects of Macquarie’s proposition – not least its approach to commissions.

“Brokers and aggregators like our simple and transparent commission structure,” said Macquarie Bank executive director Frank Ganis. “There are no requirements for minimum volumes and no complex conversion hurdles to qualify for commissions.

We pay an upfront commission and a consistent trail for the life of the loan, including the first year.”

Macquarie’s approach to credit decisions was also seen as a plus, added Ganis.

“We don’t use a credit scoring model,” he said. “Every application is considered on its merits and brokers can talk directly to the credit team. Brokers feel that our credit team and our BDMs make every effort to understand the nuances of a particular loan application. The feedback from brokers generally and the executive team also received on this trip was that this is a really strong differentiator for Macquarie.”

AFG’s general manager of sales, Mark Hewitt, agreed with the

feedback given to the bank. He commented that the brokers that have been using Macquarie have given “very good feedback”, and that it was providing a “genuine alternative” to the major brands.

“The key things that people are saying are that Macquarie’s approach to credit decisions is more flexible than some others,” said Hewitt. “Macquarie recruits and employs very good staff, and their BDMs are quite experienced. That’s always been one of its strengths.”

In fact, the bank has recently appointed Marilyn Pratt as a BDM in WA; she rejoins Macquarie from Australian Life Insurance, where she has been state manager for WA. Pratt was the BDM for Macquarie Mortgages in WA until the business wound back its operations during the GFC, and is the fifth BDM to return to Macquarie this year.

A spokesperson for Macquarie added that the bank was expecting to appoint another BDM in NSW in the next month, in response to the “growing number” of brokers working with Macquarie.

required, said Gration. He also suggested that using scoring systems supplied by service providers and asking ‘is there anything else we should know about?’ at the end of interviews would help protect brokers in cases where applicants provide misleading information.

Even so, Gration maintained that changes in credit reporting were needed to prevent such situations occurring.

“Under Australia’s current negative credit reporting system, banks do not have all the information available to help them make the most informed assessment of a person’s ability to repay their debts. They cannot see whether a consumer is overcommitted,” said Gration.

“Without positive reporting, lenders face challenges in gaining an independent understanding of a

person’s financial commitments.”

Legislation bringing positive reporting into force is expected to be laid before Parliament by the middle of 2011, and is likely to come into force by mid-2012.

The report also revealed that property was still the main reason Australians borrowed money, up from 34% of respondents 12 months ago, to 44%. This is the highest percentage of debt going towards property in the past seven Veda debt studies. As many as 44% of Australians surveyed said they intended to apply for credit to buy property in the next six months – up from 36% in March.

Even so, three-quarters of respondents were concerned about their ability to repay their debts over the next 12 months, with rising interest rates, food costs and living expenses being the primary causes for concern.

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News CBA print on demand to reach more brokers Two hundred more brokers will soon be able to print Commonwealth Bank loan contracts in their offices.

Kathy Cummings, CBA’s executive general manager of third party banking, revealed at a media briefing that the bank would be rolling out the service to ‘quality A-grade’ brokers soon.

Currently, only its top tier of ‘diamond’ brokers can print contracts from their offices.

Cummings said CBA’s strategy is to make things “simple and easy” for its customers.

She also added that CBA is taking steps to achieve ‘channel parity’ between broker and branches and to improve its

credit decision process.

Cummings also defended the Australian banking sector’s record, pointing out that no Australian banks had been bailed out by governments during the GFC – unlike many other economies.

“The banking sector is the ‘engine room’ of the Australian economy,” said Cummings.

“The current economic situation would be very different if Australian banks had had to have been bailed out by the government. It’s worth bearing that in mind when banking profits are criticised. The fact we haven’t is a testament to the effectiveness of Australian

AIPB to make a comeback Australian Institute of Professional Brokers national president Paul Flakus has vowed the finance broker association is “still active”, despite currently being in a “holding pattern”.

“We are waiting for the completion of all the new credit laws, which we are fully supportive of for mortgage brokers,” Flakus said. “Until then, we are in a holding pattern so to speak.”

The body registered with ASIC at the beginning of 2009, and promised to represent the interests of a wider portion of the finance broker market than the MFAA and FBAA. However, the body’s former CEO, Maria Rigoni of Universal Wealth Management, said the association met challenges with recognition by the industry.

“The biggest hurdle was that lenders wouldn’t recognise the AIPB as an industry body for accreditation purposes, so brokers had a conflict, and were asking if they had to pay an additional fee. It was a big thing for them,” she said.

Rigoni also said lenders in the market “didn’t want to hear the issues we were raising. The easiest way for them to get rid of something like that is to just make it really difficult for people to become involved,” Rigoni said.

Flakus refused to comment on the AIPB’s current membership numbers, however Rigoni said a smaller membership base was a problem in being seen as a credible voice for the industry.

“There’s nothing to say that you have to have a certain number of members to be a voice

Maria Rigoni

within the community, but Treasury wouldn’t let us in to be a voice for finance brokers because they said they wanted the representative bodies with the largest numbers.”

Rigoni resigned from her position as CEO in mid-2010, which was a voluntary role.

Deputy vice president John Ryan has also stepped back for business reasons, though Michael Landy, a founding member, continues to participate in the day-to-day running of the AIPB. Over the past 12 months, the body did, however, make a number of submissions and lobbied the ACCC and ASIC in relation to bank commission clawback measures.

Currently, Flakus said that the group is finalising a series of business functions to be held over the next 12 months, which will be posted on the organisation’s website.

He reiterated the association’s aim is to represent and assist finance brokers from a range of backgrounds – not just mortgages – including general finance and equipment finance.

financial regulation and regulators.” Cummings also stressed that, out of the $6.1bn end-of-year profit CBA posted this year, around 74% was returned to shareholders, including 780,000 ‘mum and dad’ investors.

The bank’s latest Economic Vitality Report also revealed that consumer confidence is increasing, although optimism in regional areas is weaker than in cities.

Perceptions are also more positive among men, with one in three seeing the economy as strong, compared to just one in five women. Nineteen per cent of the 2,000 respondents to CBA’s survey ranked cost of housing as their primary concern.

Vow on trail acquisition trail Vow Financial is on the lookout to buy trail books from retiring brokers both within and outside its broker network, which it will in part use to fund new brokers into business.

Vow Financial WA account executive Brad Driffill, a former director and shareholder of The Brokerage, said Vow is building a register of brokers ready to sell or buy these trail books, and had set aside capital over 12–24 months in order to fund new start-up broking businesses.

The strategy of providing funding for new brokers takes a leaf out of the financial planning book, Driffill said. “Some dealer groups have funded people into financial planning businesses.”

This helped ageing dealer groups such as AXA, where many of the financial planners “sat on their trails and didn’t service their clients satisfactorily”.

With barriers to entry getting higher in broking, Driffill said buying a trail book was one way for new entrants to gain a foothold. “One of the ways is for them to buy an existing client base. If we can assist with funding options to help them get in, we are willing to,” he said.

The start-up strategy has grown out of its own internal register of buyers and sellers, where Vow matches up retiring brokers with businesses who are looking to grow their books.

“We’re looking to offer options for our existing guys,” he said. “If

Kathy Cummings

they want to grow their business, a quick way to do it is to buy a trail book. But if they are looking to retire, if they are aged in their 60s and want to get out, rather than sitting on their trail book and watching it slowly diminish, let’s talk about finding another broker to purchase it,” he said.

Vow’s expansion of the register to include external brokers has only recently begun, and the aggregator has all the documentation in place to help with the transactions.

Driffill has also flagged that Vow has ambitious plans to grow the business in WA, where it is “lacking numbers a bit” compared with other states in the East. The group is hoping to grow by acquiring larger, independent broking firms, as a “quick way to grow the business”.

Although the focus will be at this higher end, Vow also hopes to attract smaller groups.

Brad Driffill

www.brokernews.com.au

INDUSTRY NEWS IN BRIEF Rate Saver proves popular

New figures from mortgage industry technology provider Stargate show CBA’s Rate Saver home loan was the most popular product for brokers in October. In its first Stargate Product Popularity Index, a survey of 1,500 brokers who use the group’s Symmetry loan processing platform found the Rate Saver home loan was almost three times more popular than its nearest rival product from NAB Homeside. Over 14% of all loans written by respondents were CBA Rate Saver loans, while the NAB Homeside product took 5% of loans.

However, Rate Saver’s $314,000 average loan size through brokers was outshone by Homeside’s $416,000.

Banks maintain market stranglehold

APRA statistics show the top four banks still control more than 80% of the housing loan market. Westpac, CBA, ANZ and NAB collectively own 83.3% of all owner-occupied housing loans in September. According to Senator Nick Xenophon, this reaffirmed the importance of a Senate inquiry into the banking system.

Home loans held by the major banks totalled $563.5bn – the total loan market is $700bn. However, Smartline personal mortgage advisor Kevin Lee said lending institutions generally classified as non-majors were indeed making a comeback. “For the second month in a row Smartline advisors have submitted approximately 30% of our loan applications to our ‘nonmajor’ lenders,” Lee said, without need for government intervention. This compared with a proportion between 5–10% during the GFC.

I-Financial signs up first credit reps

Financial services group I-Financial has signed up its first broker franchise group as a credit representative under its compliance-only licensing program.

Investor Loans Network brokers will become credit representatives under I-Financial’s ACL, while continuing to aggregate with its existing aggregator, PLAN Australia. “We have a very strong relationship with PLAN and value them tremendously as our aggregator,” said Investor Loans Network director Scott Nicholas.

“But I was completely torn when it came to the best licensing option for our network. I don’t see being a credit representative under an aggregator as the best path, but the burden of our own licence was equally unattractive.

I-Financial Group’s third option was the obvious middle ground.”

I-Financial’s set-up aims to separate licensing from aggregation.

Major bank loans cost more: InfoChoice

Blindly sticking with a big bank loan is costly, according to the finance comparison website InfoChoice. The website found borrowers could save thousands of dollars a week by shopping around for a better deal.

Households with a $300,000 mortgage, a $25,000 car loan and $2,263 on a credit card could save $80 a week by switching from the major banks. The average variable interest rate for big bank loans are 1% higher than their four cheapest rivals, the website found. Better Option, State Custodians Mortgage Company, Ratebusters, and Nationwide Lending offered an average variable rate of 6.41%, with no application fee and a $210 yearly service fee.

Mortgage House now in Perth

Mortgage House has launched its first two branch offices in Western Australia, with the intention of quickly growing numbers to keep pace with the booming, resource-focused economy. The first branch – in Joondalup, north of Perth – has been opened and will be managed by Robert James and Shelley Withers. The other will be in Perth’s Swan Valley.

Mortgage House managing director Ken Sayer said the group is in discussions with three other interested parties, with the intention of opening more branches in Perth.

James formerly opened Mortgage House’s Liverpool branch, and relocated to Perth two years ago, while Withers comes across from National Trust. James said WA continues to attract people wanting to work and live in the state because of employment opportunities created by the mining and resource sectors, resulting in rising house prices.

Trigon takes on aggregators, franchises Finance broking group Trigon Financial has promised to offer more competition with existing aggregator and franchise business models, with the launch of a “partnership model” that will focus on building broker businesses. Currently in its start-up phase, Trigon is aiming to attract new and existing brokers with a business model that aims to provide more support in regard to sales, business management and business mentoring, and other areas such as retaining clients, generating leads, and diversifying income. Trigon director Bernie Kelly said the group’s model has emerged from concerns with existing franchise models, that have in some cases seen turnover of brokers within year one of around 50%.

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News

For all the latest mortgage industry news, visit www.brokernews.com.au

Mortgages force Pundits agree on borrower credit binge flat housing fortunes Median credit card debt rose by 24% over the third quarter of 2010, as households turned to their credit cards in an effort to stay on top of their mortgage repayments.

The latest Household Financial Wellbeing Index from ING Direct found that borrower comfort levels with home loans fell over the third quarter of 2010, even though 49% of households with a mortgage are making additional repayments on their loan.

Borrowers’ extra repayment efforts saw the median outstanding mortgage balance drop from $175,509 in the second quarter to $174,959 in the third quarter of this year.

However, the additional repayments consumed disposable income, and households turned to their credit cards to fill the cash gap as they attempted to deal with rising living costs.

Outstanding credit card debt grew “alarmingly”, according to ING Direct results, with the median balance rising from $1,673 in the second quarter to $2,072 – a leap of 24%. More Australians also embraced credit cards during the quarter, with only 10% of Australian households now living without credit cards, down from 12% in Q2.

ING Direct CEO Don Koch said the credit card binge is “potentially dangerous”. “Households are taking the right approach by aiming to pay off their loans early and avoid dipping into savings. But the over-reliance on credit cards is a worrying trend,” he said. “Home loans are underpinned by an asset

that will rise in value over time.

The same cannot be said of card debt. The higher interest rate applicable to credit cards will see many families burdened.”

Koch suggested that in the long run it could create a “devastating debt spiral” for borrowers, and urged homeowners to pay down credit card debt ahead of their home loans.

Household financial wellbeing also declined during the third quarter, according to ING Direct.

The index – which measures household comfort levels across aspects of personal financial wellbeing – declined from 113 in the second quarter to 108 in Q3.

Other key findings: ING Direct Financial Wellbeing Index Q3 • Household incomes rose from a median of $63,571 in Q2 to $71,140 in Q3, reflecting annual bonus payments, mid-year salary increases and a firmer labour market • Average personal savings increased from $6,848 to $8,912, but remained a concern, scoring the lowest comfort level across ING Direct’s index • Despite personal tax cuts from 1 July 2010, households are struggling to meet everyday living expenses, with a comfort level of 3.9 (out of a possible 7)

Mortgage Choice teams up with Advantedge Mortgage Choice has confirmed that Advantedge will be the funder for its forthcoming white label product suite.

The product suite, which is being launched this month, will focus on “one or two products” with an emphasis on sharp pricing, according to Mortgage Choice CEO Michael Russell.

“With the likelihood of interest rate increases over the next year or so, we’re looking to respond to that,” said Russell. “The product suite will focus on one or two products than consumers will be likely to want.”

Russell added that Advantedge clearly came out as “number one” among the lenders Mortgage Choice considered.

“Advantedge has the experience and the ‘runs on the board’,” added Russell. “It’s got a great infrastructure in Melbourne, and the fact that they’re bank-backed gave us extra surety on funding. It was also clear that there was a real, genuine desire to work with Mortgage Choice.”

Advantedge’s experience in providing white label loans to the Choice, PLAN Australia and FAST aggregation groups also

The Australian housing market is unlikely to see significant growth before the year is out, according to a chorus of industry property research groups and pundits.

RP Data/Rismark figures for September show that markets across Australia are continuing to plateau, with seasonally-adjusted growth in capital cities averaging out at just 0.1% and regional markets falling by 0.9%.

Canberra, Sydney and Melbourne showed the strongest growth, with values increasing by 1.9%, 0.8% and 0.7% respectively. Perth, meanwhile, saw values fall by 5%.

RP Data senior research analyst Cameron Kusher reckons there’ll be no major changes before 2011. “The middle of the year is typically a much slower time for sales activity and this year was no exception, with capital city property values declining during winter,” he said.

“Following on from these soft conditions there is little to suggest there will be any significant rebound during spring. With total stock in the market at above average levels and weekly auction clearance rates remaining below 60%, we expect relatively flat growth in property values for the remainder of the year.”

He added that this could be good news for buyers, as there could be “increasing scope for price negotiation and less competition amongst buyers, with an above average number of properties for sale”. Even so, influenced the decision. “We spoke to a number of people in those aggregation groups, and it was clear that the Advantedge white label products were very well received. The feedback from those groups was that Advantedge was doing an outstanding job.”

However, Russell emphasised that the new loans would not be favoured over other lenders’ products, and that the products would still be launched under a standalone brand.

“Mortgage Choice is still 100% committed to our long-held ‘paid the same’ policy,” he added.

“Upfront and trail commission will be paid to a franchisee at the same commission rate regardless of the lender or loan product a new customer chooses.” This is something that the company’s

Rismark managing director Christopher Joye warned prospective buyers not to forget the impact of looming interest rate rises.

“It is now just a matter of time before the RBA and/or the banks raise rates again,” said Joye.

“Home loan rates will eventually start increasing with the prospect that the peak mortgage rate could converge to close to 9%, which is more than 1.5% higher than the current average variable mortgage rate of 7.4%. New borrowers taking out loans should be prepared to service rates 1.5% higher than what they are currently paying.”

Meanwhile, property strategist Michael Matusik is arguing that the next decade will see a significant slowdown in house price growth compared to the last 10 years. “The last 10 years have been fantastic; the next 10 years will be different,” he told an audience in Sydney in October. “I think we’ll see a sloppy, frugal marketplace, where people will measure many times and not cut.

There may be limited growth overall – in fact, I think an average figure of 7% over 10 years would be very good.”

However, Matusik argued that a property crash was unlikely, due to the strong employment market and the significant amount of equity that Australians typically have in their properties – meaning prices would need to fall a long way before negative equity situations occur.

Michael Russell

brokers feel strongly about, commented Russell.

“Mortgage Choice franchisees are very proud of their consumer advocacy stance and find ‘paid the same’ a terrific unique selling point. They don’t want to see that proposition disappear, nor do we.”

20 www.brokernews.com.au

News

Broker business model ‘untenable’ Decreasing commissions and the increasing cost of doing business is making the traditional broker business model untenable, according to the founder of Australia’s fastest-growing financial planning/broking company.

Tony Pennells, managing director of Wealth Today, believes that mortgage brokers must reinvent themselves as “the financial services equivalent of GPs” if their businesses are to remain viable over the next few years. “The greatest challenge at present is seeing how the broker industry can sustain itself,” said Pennells. “There’s a fight for survival that will take place over the next 12 months, and there’s a responsibility for both brokers and the wider industry to create a business model that’s going to be more viable.”

Instead, Pennells – who qualified and worked as a medical doctor prior to founding Wealth Today – argues that by becoming the ‘general practitioner’ of financial services, brokers can not only expand their businesses – with potentially significant earnings increases – but also reduce their reliance on banks.

“In the financial services space, everyone is a specialist, and that introduces an implicit bias. What’s missing is someone like the GP – who’s perhaps not an expert on everything, but can provide access to affordable, comprehensive financial advice, or refer you to a specialist as required. Brokers can ideally fill that space.”

Pennells acknowledges that this will mean brokers must undertake further education, but believes that this can be managed effectively by partnering with businesses like cont. from cover

>>

With rates on the rise, volumes may only deteriorate further.

“Consumers are in lockdown mode, saving their money instead of spending it, which would be healthier for the economy. I think brokers are going to have a tougher time moving into Christmas now, and it’s not going to be until March that we start to see things improve,” he said.

However, the wait for competition

Cost of living top of mind for buyers

Wealth Today, which provide financial planning training and ongoing support.

Pennells also believes that diversification will be made easier thanks to convergence between the AFSL and ACL regimes as the latter beds down.

“The basis of the ACL has come very strongly from the AFSL regulations, but they’re still very separate,” said Pennells. “I think there will be further convergence; admittedly, we won’t see immediate change, but as the new regime settles in we’ll see changes within three years.”

Wealth Today currently has 60 franchises across the country, with over 600 enquiries received.

It was ranked the 22nd fastest growing company in Australia in the BRW Fast 100 awards, and was the fastest growing financial planning/broking company on the list – two places above aggregator Connective.

Homebuyers are more concerned about cost of living increases than interest rate rises, according to research from mortgage manager Homeloans.

The non-bank lender’s Home Buyer Barometer found in October that increases in everyday living expenses were the greatest financial concern of 34% of current and potential borrowers, outstripping the 24% of people worried by potential rate rises.

Concerns over interest rates have dropped since April, when they were the number one financial concern. In April, 32% of respondents named interest rates their number one financial concern, while 28% named rising cost of living.

Consumer Price Index figures released in late October measured inflation at 2.8%, within the Reserve Bank’s 2–3% target range. The softer figures encouraged many economists to predict a rate hold by the RBA in November, though the RBA did eventually decide to hike rates.

The research also found high property prices were the greatest barrier to home ownership for all types of borrowers, which included first homebuyers,

owner-occupied non-first homebuyers and investors.

Saving for a deposit and ability to meet repayments followed behind rising prices as areas of worry for those surveyed.

However, Homeloans national marketing manager Will Keall suggested that increasing LVR flexibility may assist these borrowers.

“As credit policies are becoming more flexible and lenders are prepared to lend at a higher LVR (loan-to-value ratio) than in recent times, saving for a deposit may well decline as a barrier,” Keall says.

On first homebuyers, the research found the most important factor in choosing a home was affordability. At present, almost half of first homebuyers are saving for more than two years for a deposit.

The research also revealed a renovation boom may also be about to take place, with 24% of respondents planning to renovate during the Spring and Summer season. Forty per cent of these renovators had put their plans on hold due to the GFC. The Home Buyer Barometer surveys over 2000 current and potential homebuyers.

could be much longer. “Ultimately after deregulation with [Prime Minister’s] Keating and Hawke, it took 20 years to get the competition to the point that we saw just prior to the GFC,” McKeon argues. “Some of those players that came into Australia post that period have been severely damaged – I don’t think you will see a lot of those players returning in the next 12–24 months – it could be half a decade.”

McKeon said in reality the “horse

has bolted” in regard to competition, and that it would have been much easier to protect the competitive market that existed, rather than have to rebuild it. He labelled the idea of a commission into banking competition and rate setting “farcical”. “Everyone knows that the best way to keep rates keen is to promote competition. But by allowing the fifth and sixth largest banks to be taken over by the Big Four, and by structuring the

AOFM to benefit only the Big Four, no one has more effectively sabotaged lender competition in Australia than this government,” McKeon said.

McKeon advocates further government support for lenders outside of the top-rated banking institutions, to enable them to sell mortgage-backed securities in a competitive manner and reignite competition. The current AOFM program is “fundamentally flawed”, he said.

Tony Pennells

www.brokernews.com.au

One year on

What a difference a year makes… or not.

Australian Broker reflects on the punditry, breaking news and influential trends that made headlines in the magazine 12 months ago

Issue: Australian Broker issue 6.22 Headline: Middle classes feeling the strain (page 14) What we reported: The Fujitsu Consulting Mortgage Stress report, released in September 2009, revealed that Australia’s middle class were suffering more severe stress than any other household group.

According to the report, severely stressed households (those facing a potential sale or foreclosure) rose by 3.9%, with the biggest proportion being in the ‘suburban mainstream’ segment. The biggest cause of mortgage stress among the middle class was “investment performance” followed by “fear of unemployment” and “fear of redundancy”. The report found a total of 554,000 households were experiencing some degree of mortgage stress in September, compared to the peak figure of 900,000 in August 2008.

What has happened since?

The latest Fujitsu Consulting Mortgage Stress Report, released in March 2010, stated that the number of households experiencing some type of mortgage stress sat at 581,000, an increase of 0.7%. The number of households under severe stress grew by 2%, with at least 218,000 households at risk of having to sell, refinance or foreclose. The main drivers of stress included interest rate rises, which lifted 11%, and costs of living, which rose by over 9%. Fear of unemployment and redundancy fell by 8% and 2% respectively.

Headline: ING beats Big Four on service (page 21) What we reported: ING Direct fared a lot better than the major banks in research conducted last year, with a rating of 84.2%. The report put satisfaction levels at the CBA, Westpac, ANZ and NAB at a combined 71.7%. The most satisfied customers were those of building societies (87.9%) and credit unions (86%).

What has happened since?

ING Direct once again outperformed the majors, receiving a customer satisfaction rate of 87.7% in the latest Roy Morgan consumer banking survey

released in August. Bendigo Bank placed second, with a figure of 86.2%.

NAB recorded the biggest improvement in satisfaction, a result that can be largely attributed to the bank’s elimination of account fees. Westpac was the only one of the major banks to slide due to a big increase in its variable home loan rate. ANZ remained on top, with a 76.2% satisfaction rating, up 2.5% from last year. CBA was second with 74.4%, up 3.5%. NAB came in fourth with 71.7%, a gain of 4.7%.

Headline: Economic recovery: the shape of things to come (page 24) What we reported: With the GFC beginning to thaw at the time and markets around the world on the mend, the Australian economy was leading the charge into recovery.

Chief economist at CommSec, Craig James, was feeling optimistic about our country’s recovery and the question then became about what shape the Australian economic recovery would take. “U, V or W; or even the latest one on the block, the square-root sign shaped recovery – where you pick up and flat line for a period of time.”

While predicting a square-root or W shaped recovery for the US, James said Australia was more likely to experience the V-shaped recovery.

What has happened since?

In July of this year, Craig James reported that, as he predicted, Australia had completed a V-shaped recovery from the GFC. He did warn that momentum has shown signs of stalling as government stimulus is withdrawn. In June of this year, the RBA governor, Glenn Stevens, stated that the world economy had staged a stronger recovery than most thought likely just a year ago. He went on to say that of importance to Australia is that the strongest growth in demand has been nearby, with most of the economies in the East Asian region, apart from Japan, experiencing a V-shaped recovery. James has stated that the biggest issue facing the US at present is whether its economy is headed for a double-dip downturn. With worldwide speculation and interest on the topic, James believes all the economic data indicates the US is merely consolidating after a V-shaped recovery in late 2009/ early 2010.

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Column OPINION THE NCCP REGIME: BUREAUCRACY OR BUSINESS AS USUAL? There will be challenges in the lead-up to the NCCP, not the least of which will be an adjustment to dealing with credit regulator ASIC, writes Kate Keating There is significant disagreement in the finance broking industry about what the NCCP compliance regime means for brokers who wish to hold an Australian Credit Licence (ACL).

Some argue the regime is highly bureaucratic, costly and impossible to comply with, especially regarding the conflicts of interest and responsible lending obligations. Others view it as ‘business as usual’.

With more than 2,000 pages of legislation, regulations and ASIC regulatory guides to digest, it is difficult for brokers to be clear about what is required. What the regulator is making clear, however, is that it expects prospective licensees to have completed risk assessments of their business models against the NCCP licensing obligations before applying for a licence.

Given the current business models available in the marketplace, many brokers will struggle to comply with the NCCP regime. The most challenging compliance issue for the industry is the obligation to ensure a broker does not have a conflict of interest that disadvantages the consumer. Where the broker has control over the interest rate to be charged, then this obligation will be difficult, if not impossible, to meet.

This is because higher interest rates result in the customer’s financial disadvantage but the broker’s financial advantage.

Responsible lending is another contentious compliance area.

While brokers claim they have always conducted themselves responsibly in sourcing finance for their customers, the obligation (already in place) to find out and document the customers’ requirements and objectives raises questions about how extensive those enquiries should be. Product features and future lifestyle questions all impact on whether

the product is ‘not unsuitable’ for the customer, both now and in the future.

Brokers also now have an obligation to verify the information given by the customer and to undertake a preliminary credit assessment. This means brokers must have their own policies and processes in place to manage these obligations. They can no longer simply rely on the creditor’s systems and credit criteria. From 1 January 2011, brokers must be able to produce documentary evidence of the basis on which the preliminary credit assessment was made. The next two years is likely to see considerable change in the broking sector as ASIC establishes and enforces the standards it sees as necessary to meet NCCP obligations. Brokers will need documented risk and compliance policies and procedures in place, and be able to justify credit decisions and to demonstrate proactive compliance.

The big unknown though, will be ASIC’s approach to commission structures based on rate setting. Either the legislation will need to change to accommodate how the market currently operates – or this type of commission arrangement will stop. The NCCP Act has put the industry on notice that the sector will face significant structural and compliance challenges, as ASIC sets the compliance benchmarks.

So, will it be bureaucracy or business as usual? I would expect the former.

Kate Keating

Kate Keating is a director of legal, compliance and training provider CreditWise

IN SEARCH OF VALUE, VOLUME AND FREQUENCY...

Craig Wright discusses the advantages available to brokers and their clients in providing an integrated property solution as part of their service The mortgage broking industry has experienced incredible transformation in the past few years – and most would agree some changes have not been great. There are commission cuts, fewer lenders, credit and lending policies are an everchanging landscape, and there are greater compliance rules and costs to contend with. What’s interesting about this is the number of brokers who now have to write sometimes up to three times the amount of business they used to, in order to earn the same income they did only 12 months ago.

To continue growing your business, it is imperative the volume of clients you write business with increases. This much is obvious. So the secret to truly developing and sustaining a profitable business plus a point of difference is now about extracting additional value and more purchase frequency from clients and transactions. Love the clients you have, and they will love you back!

I believe the time is right for brokers to integrate a property solution that complements investment philosophy, brokers’ business requirements and supports what clients are looking to achieve. When I work with brokers who understand this way of thinking and act on it, I continually find they are more active in their business, they earn more than the majority of the broking community and their clients are more satisfied and happy.

Six advantages So, what are the advantages for a broker offering a property solution? From my experience working with brokers who diversify, there are six key positives: 1. Risk minimisation and diversification – spreading the broker offering from one core offering to multiple angles not only

diversifies revenue – it also reduces risk from relying on a single focused business 2. Increased revenue and earnings – in addition to diversification of income, many brokers who have added property services to their bow have more than doubled – and often trebled – their income 3. Competitive edge – adding additional services provides brokers with a point of difference, and builds your reputation as ‘the broker who can do it all’ 4. Higher level of control – so often, the risk in referral relationships and strategic alliances is that clients end up on someone else’s database. Through developing a trusted referral relationship with a property supplier that works ‘with’ the broker’s business, they are able to gain much more control in the client relationship, and are able to provide a complete end-to-end solution 5. Much higher client retention, and less client and revenue run-off – by providing a property solution there is a significant and marked improvement in the frequency at which clients repeat with the broking business 6. Moves the client and broker relationship to the position of ‘trusted advisor’ In a time-poor world where convenience is a true buying motivator, brokers will benefit from having a ‘packaged’ offer, where clients can experience a single relationship for the length of their property and investment life.

Craig Wright is the head of the investment property division at Run Property, which provides property services for mortgage brokers.

I believe the time is right for brokers to integrate a property solution

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FORUM MORTGAGE MARKET STALLS, NON-BANK INNOVATION AND APPLICATION SNAFUS AFG recently reported its worst October in four years after a stark decrease in the amount of mortgage lending, leading the aggregator to warn that the mortgage market is “stalling”. Here’s what you had to say on this and other issues, on the Broker News forum Most Australians aren’t in the mining industry, which means that the average Australian is still in the grips of a recession. With costs of living rising at such rapid rates these figures are only going to get worse. This is the real economy not the illusionary mining/ resources boom which only benefits a select few.

Commented by: Terry at 01 Nov 2010 01:05 PM I wonder how much lending has fallen because ASIC has made it too hard for low-doc lenders and their potential borrowers?

I think it must be substantial and it’s only going to get worse.

This applies to a whole bunch and variety of other potential borrowers.

Combine that with the various restrictions brought in by LMIs over the last few years (lower max LVRs, refusing cash out, picky genuine savings rules), and of course the higher interest rates (by RBA and supposed bank cost of funds increases). In the end there are far fewer people eligible for loans than before the GFC hit. All this lower lending eventually has a big multiplier effect on the economy. A perfect storm?

Commented by: broker2010 at 01 Nov 2010 01:31 PM I’m sure a large factor in this low number of loans is the lenders making policy so tight that fewer people qualify for a loan.

Housing prices remain steady or increased, incomes less so and many are now self-employeds or contractors, genuine savings requirements are back, while at the same time benchmark rates increased. Of course there are going to be less loans written. And this would be justifiable were bank profits dwindling… but they’re actually increasing. Instead of inquiries, there should be law suits (for lying).

And the government will NEVER do anything concrete about it because it risks pissing off shareholders in these banks. Catch 22. I’ll just keep helping people and writing loans, and ignore the rhetoric from both sides.

Commented by: Martin at 01 Nov 2010 02:34 PM Or it could be that people are starting to think twice about getting into further debt. Caution is not a bad strategy at this stage.

C’mon guys you can’t keep blaming the banks for everything.

Commented by: Dave at 02 Nov 2010 08:05 AM

FirstMac managing director Kim Cannon’s call for the government to do more to support non-bank lenders met with demands for product innovation from non-banks What innovations are they working on behind the scenes?

Competition doesn’t just come down to pricing – hopefully they are working on innovations to improve the application process, ie, ease and speed of approvals, maybe through technology. This is

what brokers are after. If brokers are confident in the approval process they will be able to recommend the products. Are they asking for brokers’ opinions on these things or are they just assuming by bringing in a fantastic new product that brokers will come. In a nutshell they need to convince the brokers of their products/processes before they are going to make any ground. The first thing they need to do is ask brokers what they are after, which they don’t seem to be doing.

Commented by: Matthew Smith at 25 Oct 2010 10:38 AM Non-bank lending in Australia is over. Recent events have shown the vulnerability of non-bank lenders and responsible brokers will consider this when making their recommendations. The gravy train is over boys and if you can’t cut it without government support, try something else.

Commented by: BrokerWatcher at 28 Oct 2010 09:34 PM

Meanwhile, brokers were unforgiving in their approach to the 20% of ASIC applicants that had been rejected due to simple mistakes on their ACL applications You have to ask about the suitability of the prospective licensee if they can’t get a simple application process correct in the first instance…

Commented by: The Bone at 02 Nov 2010 12:32 PM It seems to be that some people just shouldn’t be brokers. You take applications for a living and yet can’t fill one out … go figure!!

Commented by: I agree at 02 Nov 2010 09:18 PM

The MFAA’s approved educator list met with some complaints from forum participants, but there were those who supported the industry body’s move to provide a list I agree with the MFAA process in the selection, as believe it or not, there are many RTOs out there in the market providing all levels of training and various courses. I would strongly encourage all students to actually look at the background and experience of the RTO owners and trainers of any course on the RTO-approved list. The MFAA has chosen the ones they have to ensure their members get industry knowledge and professional solutions relevant to job requirements. If other professionals such as accountants, financial planners and real estate licencees have to have Diploma-level qualifications and brokers want to deal with them, then why not be on the same level as them? They would welcome that and feel more comfortable in the referral process.

They’ve done the hard yards and it’s our turn now.

Commented by: Supporting the Initiative at 23 Oct 2010 12:43 AM To join the debate, go to www.brokernews.com.au/forum

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www.brokernews.com.au

Insight MY WAY

Wendy Higgins

Perennial top performer Wendy Higgins from Mortgage Choice was named Broker of the Year at the Australian Mortgage Awards, and has set her sights on a loan book worth $1bn. How does she do it? Higgins outlines her recipe for success

What has been your greatest business achievement?

That would be being named number one broker for 2010 and 2009 by MPA magazine ( just before receiving my wins at the 2010 MFAA Awards). To know that I personally write more loans than anyone else in Australia makes me very proud.

What’s the key to getting the business through the door?

My reputation as being very accessible, professional, ethical and trustworthy by clients and referral partners.

This relates not just to me but to everyone in my office.

What goal/s have got you to where you are?

My number one goal is to look after each and every referral so that they end up being a client.

What has helped you the most, and how?

My SOU (sense of urgency). I want to get on with it quickly, get it done and get onto the next one. This way I always keep on top of my work load and exceed expectations.

What trait do you most value in yourself?

My passion, my caring nature and my desire to meet the needs of all who ask for my help.

How do you stand out from the crowd/competition?

I look and act professional at all times. Our office is also very professionally presented. Nothing is too much trouble and we have a very stable group of staff who all have the same sense of urgency and caring attitude to clients’ needs.

What do you tell yourself when the going gets tough?

If it is hard for us then it must be hard for everyone else in our industry. We knuckle down and just try harder. My team and I have survived all challenges over our 13 years together and are always assessing how we can improve things while being open to new opportunities, such as diversification.

What is one thing you want to improve in your business?

Two things – diversify our income sources and move to a paperless office.

What piece of advice would you give to an ambitious broker?

Look after every lead like gold. Do the same with all referral points and keep lines of communication open.

Expand slowly as the business grows and always employ staff with the same work ethic and culture as yourself.

What’s your next greatest ambition?

To see my loan book reach $1bn, which should be by June 2011.

Show us your PI! ASIC has rejected 20% of ACL applications due to broker mistakes, so what do you need to watch out for? Greg Ashe from QED Risk Services outlines one such pitfall

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here are plenty of traps for the uninitiated in the ACL process with ASIC and the most annoying one comes right at the end of the process. Watch out for your PI! You will receive an email containing your “draft” Licence and a final request for information – about your professional indemnity insurance. You must provide your PI Certificate of Currency and you must ensure it contains the following:

1. The expiry date – make sure it is current 2. The name of the insured – make sure it is for the

correct entity, ie, you and/or your company. If there are other parties covered as well, discuss this with your broker as this is going to cause you grief with ASIC

3. The sum insured for one event and in aggregate – or the number of reinstatements, which could be zero (and that’s fine if it is)

4. The events covered – make sure it states coverage for fraud by officers

5. The excess amount 6. The name of the insurer But the one thing that they don’t ask for and then expect you to have is this – your policy will normally contain a ‘sub-limit’ on the amount that they will pay out for COSL/FOS awards. This sub-limit must be at least $250,000 if you are with COSL and $280,000 if you are with FOS. This sub-limit must be shown on your Certificate.

If you are missing any of the above, contact your broker for a new Certificate – it won’t be a surprise to them. Get this taken care of now to save yourself time at the end of the ACL process.

Greg Ashe

www.brokernews.com.au

25

Toolkit

Cash f low Are you sure you’re getting what’s owed to you – and making the best use of your income?

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usiness conditions aren’t easy at the moment. While the Australian mortgage market may not be in the dire straits that the US and UK are experiencing at present, looming interest rate rises, the impending costs of the new licensing regime and the post-GFC commission environment means that individual brokers are being squeezed.

That makes it even more important to get every cent you’re owed, as well as making the most out of the cash you have.

Get what you’re owed

Making sure that you’re paid for the work you do is a key part of effective cash flow management. While you might think this is a problem which time has passed, National Finance Institute managing director Peter Heinrich reckons that the incidence of unclaimed or unmatched commissions is a “very common problem” in the industry.

“Some brokers mentioned to me recently they had been quite slack about reconciling their commissions from their aggregators and found when they did, they were owed several thousand dollars,” says Heinrich.

“One broker who spoke to me said that because he was very quiet at the moment he reconciled his loan book and found he was owed over $40,000 in unclaimed or unmatched commissions.”

National Mortgage Brokers managing director Gerald Foley admits that aggregators have a key role to play in ensuring that commissions are paid, but argues that brokers should regularly review their loan books.

“It’s good business practice to review your loan book just to make sure there’s no noticeable exceptions or loans that have ‘dropped off’,” says Foley. “At NMB, at the end of each commission run, we look for loans that have fallen off the trail report. We advise our brokers which loans didn’t receive trail. Often, it may be the case a loan was paid out because it was refinanced, which we can’t tell just from looking at the report; if not, we can follow up with the lender and query whether that trail should be reinstated.”

Cut your costs

While you’re making sure that what’s coming in is right, it also makes sense to look over what’s going out.

Consider doing a regular review of company expenses – in effect, the same kind of financial health check that you would typically do with a client, only on your business.

Look at large, essential costs – PI insurance, office costs, telecoms, computers and so on – and see if there are cheaper alternatives that could save you a few dollars. For

101

instance, combining mobile phones and office lines into one contract bundle could save you money; so could bulk buying stationery, rather than making small orders. Even making sure you turn off the office lights and computers at night could make a difference.

Maximise your income

Foley comments that making sure you make the most of every opportunity with a client is also key to making sure you get as much income flowing in as possible.

“Customers may be hard to obtain, but when you do find a client it makes sense to cross-sell relevant products like mortgage protection insurance or other insurance products,” he says. “It is a good way to improve your cash flow by either directly selling those other products, or referring on for a fee.”

Being disciplined about getting in touch with existing clients is also key to maintaining a steady income flow.

“Touching your existing database through standard CRM techniques will improve your existing cash flow,” says Foley. “Call existing clients on a regular basis with courtesy calls, to ask how things are progressing, and to see if there is anything you can assist with.”

The integrated approach

Michael Kinens, BDM at software firm IRESS, argues that cash flow management doesn’t begin once income has been confirmed – it starts much earlier than that.

“Today’s professional business really needs to understand what its potential sales pipeline looks like right from the beginning, and how much revenue is sitting in various stages of the process,” explains Kinens. “For example, let’s say that I’m a broker, that you and I have just met, and you’re talking about getting a new loan for a home. I can glean from that conversation an insight into what that means for me in terms of revenue, and how likely it is that revenue will actually happen. It’s at this point that I would want to capture the fact that I’ve had a conversation and that there is potential income – and continue to track conversations as they continue and income potential becomes more concrete.”

Essentially, what Kinens suggests is bringing together CRM and the financial management process.

“By taking a holistic approach, I’m able to see how my likely cash flow is looking now and in future, in dollar terms” he adds. “It also allows me to be very settled in knowing that nothing will fall through the cracks in terms of servicing the customer, and in terms of business planning: so, if there’s a surge coming, I can ensure I’m ready for that and able to maintain a good level of service.

“Cash flow management isn’t just about making sure you get paid – it’s about the entire business process,” concludes Kinens. “It’s at the core of running your business – which is just as essential as the entrepreneurial and relationship-building activities that brokers tend to concentrate upon.”

Cash flow management doesn’t begin once income has been confirmed – it starts much earlier than that

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www.brokernews.com.au

Market talk A large swathe of prospective buyers are at risk of giving up on property ownership altogether

Pennies in the bank

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irst homebuyers are stuck between a rock and a hard place: in need of everincreasing savings in order to get on the property ladder, while being hammered with increasing rental payments. Is it time to rethink savings requirements?

Mark Bouris, chairman of Yellow Brick Road, thinks so. His company recently launched a loan targeted at first-time buyers, in which the usual requirement to display a genuine history of savings is waived: indeed, sources for deposits can come from sources as varied as gifts from parents or other family members, an inheritance, windfall gains and tax returns.

“The big banks often require a borrower to show that their deposit is the result of a long-term savings plan, which can make it much harder for people to purchase their first home,” Bouris says. “I don’t believe that this is necessarily an indicator of their ability to make their mortgage payments.”

Bouris says more critical considerations are income and credit history, rather than the origin of the deposit.

Loan Market chief operating officer Dean Rushton takes a similar view – although his suggestion is slightly different. He believes that banks should place a greater emphasis on rental payments as evidence that mortgage payments can be serviced.

“Rental isn’t generally taken into consideration by lenders,” says Rushton. “In city centres especially, rent

can be as much or more than a loan repayment. By taking out a mortgage, some renters’ outgoings would actually reduce! However, the high cost of rent means that, sometimes, it’s not possible to save in the way that someone still living at home with a parent can, and there’s an expectation that renters should do that.”

Rushton argues that making rental repayments over the course of several years is just as valid a measure of the ability to repay a loan as long-term saving for a deposit is.

“In practice, I’d see something like this working as a tiered system – so in theory, someone who can show evidence of making rent payments may need to put in a 3% deposit, rather than a 5% deposit,” adds Rushton.

“You could potentially offset the risk with stronger serviceability requirements – however, with many of these buyers, serviceability isn’t the issue – it’s actually having the deposit.

Rushton stops short of advocating 100% loans, however.

“I’m not in favour of 100% loans – I think there has to be some level of savings there – but the difference between 5% and 3% in the time it takes to save that while renting is considerable, especially in a rising market. Otherwise, it’s just a vicious circle, and first homebuyers are left sitting on the sidelines.”

Exactly how that vicious circle should be broken is set to remain a subject for debate – indeed, some still take the view that prospective buyers should just knuckle down and learn to save more effectively. However, the reality is that the environment has changed, and a large swathe of prospective buyers are at risk of giving up on property ownership altogether – and that could have significant repercussions for the rest of the market down the track. It’s potentially in lenders’ long-term interests to take a more Catholic view of first homebuyers’ resources – before it’s too late.

www.brokernews.com.au

NUMBER CRUNCHING

MARKET NEWS IN BRIEF Rate chaos good for brokers, non-banks

 RP Data-Rismark Home Value Index – September State

Property Type

Median price

Monthly growth

Quarterly growth

Year-onyear

Sydney

Houses

$582,000

1.1%

0.8%

8.9%

Units

$450,000

0.6%

0.8%

10.4%

Houses

$499,000

0.8%

1%

13.2%

Units

$425,000

0.1%

0.1%

11.1%

Houses

$460,000

0.7%

-1.6%

1.9%

Units

$375,000

0.4%

= -0.7%

3.2%

Houses

$400,000

-0.5%

-0.4%

6.1%

Units

$330,000

-1.3%

-0.8%

5.6%

Houses

$480,000

-1%

-4.3%

0.4%

Units

$405,000

-4.1%

-6.8%

-3.2%

Houses

$535,000

-0.5%

0%

9%

Units

$390,000

-2.3%

-0.8%

5.9%

Houses

$555,000

-0.4%

1.8%

11.6%

Units

$410,000

2.7%

4.5%

9.9%

Melbourne

Brisbane

Adelaide

Perth

Darwin

Canberra

Information (indicative and seasonally-adjusted) from September 2010

Auction clearance rates: week ending ending 17 October Clearance rate

Number of auctions

Sold

Sydney

56.5%

575

325

Melbourne

61.8%

654

404

Brisbane

19.4%

103

=20

Adelaide

57%

86

49

Darwin

50%

4

2

Perth

30.8%

13

4

Canberra

52.9%

34

18

Hobart

36.8%

19

=7

Auction clearance rates: week ending 24 October Clearance rate

Number of auctions

Sold

Sydney

56.1%

540

303

Melbourne

62.2%

1013

630

Brisbane

27.2%

147

40

Adelaide

54.1%

74

40

Darwin

10%

10

1

Perth

13%

23

3

Canberra

64.7%

=34

22

Hobart

50%

12

6

A mixed couple of weeks, with all but the auction capitals showing volatility in clearance rates, volume and number of sales. The Sydney market remained steady, while Melbourne saw a bumper weekend over 23 and 24 October for auctions – although the clearance rate remained steady, the number of auctions and sales increased by more than a third.

Source: RP Data

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Mortgage brokers and non-bank lenders alike can benefit from the impact of recent interest rate rises, according to FBAA president Peter White.

White argued that there are “enormous opportunities” for brokers in the current environment.

“People have to be smarter than the average bear in this environment,” said White, “it’s an enormous opportunity for refinance: and a golden opportunity for brokers to get back on the wagon if they’ve been doing it tough.” He added that brokers should consider non-bank lenders during this period – and that the sector could well see a resurgence off the back of anti-bank sentiment. “The non-banking sector needs to step up to the plate and have its voice heard,” he continued. ”

Sydney building to surge by 2015

New lot production in Sydney is expected to be more than twice its current rate by 2015, according to new figures from BIS Shrapnel. Projections by the research firm indicate that a recovery in new lot production in the NSW capital – which has seen land production increase from an average of 1,700 lots per year between 2005 and 2009 to just under 3,000 this year – will continue, with lot production forecast to peak at over 7,000 lots in 2012/13. BIS Shrapnel has attributed the change to “a confluence of factors” underpinning the start of a recovery in lot production in outer Sydney – not least a shrinkage of the difference in cost of buying a new house versus purchasing an existing, cheaper dwelling. “The rise in prices for established houses has meant the premium required to purchase a new house compared to an established house has narrowed,” said Zigomanis.

“Consequently, upgraders have become more willing to sell their current dwelling to purchase a brand new house on a new subdivision.”

Melbourne prices catch up with Sydney

Rising house prices have put Melbourne’s level of unaffordability on par with Sydney.

A new report from the National Centre for Social and Economic Modelling found 56% of Melbourne’s first homebuyers pay more than 30% of their disposable income on housing costs – a dramatic increase compared with 36% a decade ago.

Median house prices in Melbourne have grown 138% in 10 years to $475,000.

Meanwhile, disposable incomes for households have increased by only 58%. The report found similar increases in mortgage stress in Brisbane, while Perth and Adelaide remained more affordable.

Aussies shift credit attitudes

Credit card customers across Australia have made a greater effort to repay their debt in full this year.

Fresh research from Datamonitor has found that almost half (48%) of consumers surveyed this year had not paid any interest in the last 12 months, a shift on the results in 2009 and 2008 which were 40% and 39% respectively.

Senior analyst Harry Senlitonga said this was a “staggering” 8% nominal increase on last year. He suggests the global financial crisis has been responsible for changing consumer credit card behaviour.

However, Datamonitor said that the trend would impact credit card issuers, who are facing a potential loss of revenue. The research house suggests this may prompt a number of major reviews of credit card prices across the industry.

28

www.brokernews.com.au

Feature OFF THE CUFF

Don Koch

Chief executive ING Direct What was the last book you read?

I’m currently reading a fiction book from Clive Cussler – The Spy. I try and read at least one fiction and non-fiction book concurrently.

Recently, I’ve re-read Simply Brilliant, which has some thoughtprovoking material in the innovation and process engineering space, as well as the ageless reminder about never resting on your laurels – the book titled Good to Great.

If you did not live in Australia, where would you live and why?

Somewhere with my family and where I can be challenged professionally and personally. In each of the periods living offshore over the last 10 years, be it Italy, Poland, India or Thailand, we were exposed to cultural and professional challenges, and were given an opportunity to explore.

A truly great experience.

If you could sit down to lunch with anyone you like, who would it be?

I am often asked this question, and over the years, my answers have changed – obviously as we mature and think differently. My current thinking is that, on a continuous basis, I would really like to sit down with those people and organisations who could be our future customers, so we understand and pro-actively prepare ourselves for their needs.

What was the first job you ever had?

My very first job was concreting and building in my home town of Gunnedah. So, related to the housing industry in a broad sense. My first banking role was within one of the majors, in the same town, at a time when technology was really only originally being introduced into

branches. So, I had an early impression of the power of people as well as technology.

What do you do to unwind?

Read, walk with the family, and spend time with friends. Balancing work and life is critical for all of us.

What’s the most extravagant gift you ever bought yourself?

A motorbike, a long time ago – I was young, and needed transport and this seemed to be the right answer… And I will do it again in the not too distant future!

What CD is currently playing in your car stereo?

I am sorry – but I do not know the name as it would be either one of my children’s or my wife’s!!

If you could give anyone starting out in business one piece of advice, what would it be?

Listen, try everything and take some risks.

If I was not working in the mortgage industry, I would like to be...?

Involved in hospitality or customer service.

Where was the last place you went on holiday?

The last place I went to was the Golden Door in Queensland, which is a fantastic health retreat. I went with my family and it was the perfect getaway to relax.

NEWS AT YOUR FINGERTIPS

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29

Caught on camera PLAN Australia invited its NSW and ACT brokers to Cypress Lakes Resort in the Hunter Valley in October for two days of information, motivation and networking, as the aggregator geared up to ‘PLAN, Lead, Succeed in 2011’ Photography by Rajan Khatak

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2

3

4

5

6

7

8

9

10 PHOTO 1: MC Glynn Nicholas PHOTO 2: Steve Weston (Advantedge) and Clint Hawthorne (PLAN Australia) PHOTO 3: Ramon Ippolito (LJ Hooker Financial Services), Scott Woodhouse (Healthy Living) and Michael Platt (Navigator Home Loans) PHOTO 4: Mark Sieler (Advantedge), with Mary Boumelhem and Paul Giezekamp (Property Secrets) PHOTO 5: Garry and Kerrie Ross (Mortgage Trends Newcastle), Cheryle Hayward and Leanne Wheeldon (Midwest Home Loans) PHOTO 6: Sara Thompson (Pepper Home Loans) PHOTO 7: Peter Bromley (LJ Hooker Financial Services), Daryl Crooks (PLAN Australia), with Michael Hillier and Brian Smith (MLC Mortgage Solutions) PHOTO 8: Paul Lambess (CVG Finance), Brett Mansfield (PLAN Australia) and Paul Shahinian (Econ Financial Services) PHOTO 9: Greg Bourne (CBA) with Scott Baker (LJ Hooker Finance Central West) PHOTO 10: Fred Obeido (Proforma Financial Solutions) and Leanne Wheeldon (Midwest Home Loans)

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PHOTO 11: Onur Kocabay (Bankwest), Matt Attia (MA Business Advisory Services), Lisa Wright (Bankwest) and Tim Lemon (Adelaide Bank)

12

PHOTO 12: Ray and Genene Ethell (Ausco Trading)

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Insider

Got any juicy gossip, or a funny story that you’d like to share with Insider?

Drop us a line at insider@ausbroker.com

That ain’t a pub...

M

Homebuyers no longer all smiles

Wrong choice R

BA cash rate hike decisions are always hard to take, but the last hike in November, which pushed rates up 25 basis points to 4.75%, was harder to take for Insider than most.

This was not because Insider is going to be forced to cut back on basic necessities, or ramp up his credit card bill in order to meet mounting mortgage payments (though if there is another hike in February, this may indeed be the case!) No, this particular decision was harder to take because he was initially led to believe (and to celebrate) that rates were in fact on hold, by none other than the market’s largest mortgage brokerage, Mortgage Choice.

That’s right, sitting at his desk, and biting his fingernails while waiting for the rate news, he was astonished when the broker’s newsflash popped into his inbox almost immediately after the RBA’s announcement.

Opening the attachment on the email, he read the bold headline with gusto. “Borrowers strike gold with cash rate hold”, it read.

Pausing to pop open the champagne bottle (which he’d until then been saving for the Melbourne Cup), Insider read on, each line only serving to escalate his momentous joy at being given a Christmas reprieve.

“The CEO of Australia’s largest independently-owned mortgage broker said the company is delighted to share today’s cash rate news with customers and called on the Reserve Bank to keep it steady at 4.5% until at least February, giving borrowers a break over the holiday period,” it read.

“Mortgage Choice CEO Michael Russell said, ‘Australian families will cheer this decision in the lead up to Christmas as they make plans to enjoy quality time with loved ones. It’s an uplifting start to summer for home loan borrowers, the majority of whom have a variable interest rate’.”

Insider could barely contain himself. However, it was then that a number of other notifications began to pop in – and his celebration ended abruptly. The RBA had in fact pushed rates up. It appeared in the ruthless race to gain press coverage, the wrong choice of press releases (each no doubt lovingly prepared before the announcement) had been attached. As reality crashed home, Insider saw another Mortgage Choice email come in – a retraction this time – but by now, this was no consolation.

Gripping his sweepstake and champagne, Insider trundled off to watch the Melbourne Cup – and had no better luck.

ick ‘Crocodile’ Dundee (aka Paul Hogan) has long been a hero of Insider. The straightforward attitude, the natty dress sense, the no-nonsense approach to life – and crocs – and the relaxed view of tax returns are all attributes Insider seeks to emulate (well, maybe not the last one).

So, when Insider heard that the Walkabout Hotel, home to Dundee in the eponymous film, was up for sale, our friendly mortgage broker was the first person we called, in order to ascertain our borrowing capacity.

The Walkabout was, we argued, a snap at $1.25m for the freehold rights to the property – especially as the hotel and attached caravan park and houses generate an income of $300,000 a year. As the friendly real estate agent at Raine & Horne commented, that’s a yield of nearly 25% a year. However, it was not to be: sadly, Insider’s journalist salary won’t stretch that far. It looks like our dreams of entering the Walkabout wrestling a stuffed crocodile are over – for now, at least.

Dates for next year’s diary?

O

ctober 21 was International Credit Union Day, and people around the world came together to celebrate and commemorate Credit Unions and Building Societies and the impact they have on members’ lives. Or did they? While the creators of this day might like to think their cause is gaining international support, does anyone actually care? Insider is surprised the day has lasted 62 years. That’s right; the first International Credit Union Day took place way back in 1948. At least this one doesn’t require a donation of any sort.

With the sheer amount of celebratory and awarenessbuilding international days out there, it’s important to pick your

causes wisely so as not to exhaust yourself – or your bank account. And there are some much more exciting and worthy causes than Credit Unions.

World Turtle Day occurs every year in May and aims to raise worldwide awareness for turtles and tortoises. Why not head into work dressed as a turtle next year and give these animals the respect they deserve? Or how about The International Day of the Deliberately Unemployed – every second day of May, for those who’ve never participated – and involves you putting in a hard day’s work, while those in our society who can’t be bothered to get a job get international recognition for their admirable stand against any form of work.

Then there’s a day in August dedicated to left-handers, which aims to celebrate their uniqueness and difference. It is a day where all left-handers come together to promote awareness of the inconveniences facing then in a predominately right-handed world. When you only make up seven per cent of the world’s population, do you really expect it to change?

Those redheads out there will appreciate this next one. May 29 each year is National Redhead Day in Belgium. But does just one day of recognition and celebration make up for 364 days of ridicule?

Insider can hear you all throwing your support behind this next one – a worthy cause indeed. National Sleep-in Day is celebrated on the 3rd of January each year in the US, in recognition of the importance of sleep to our health. Everyone is encouraged to not only sleep-in, but take several naps throughout the day.

What’s next, an International day to celebrate and build awareness of the importance of international days? Insider doesn’t think the calendar has room for any more, and for one, will be scratching out International Credit Union Day next time around.

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Services

Receive breaking news updates direct to your inbox. Sign-up for the FREE e-newsletter at www.brokernews.com.au AGGREGATOR / WHOLESALE BROKER Choice Aggregation 1300 135 389 www.choiceaggregationservices. com.au page 15 Mortgage House 133 144 www.mortgagehouse.com.au save@mortgagehouse.com.au pages 16 & 17 PLAN Australia 1300 78 78 14 www.planaustralia.com.au mail@planaustralia.com.au page 5 COMMERCIAL Banksia Financial Group 1800 333 114 www.banksiagroup.com.au page 9 FRANCHISE Wealth Today 08 9207 1433 www.wealthtoday.com.au page 13

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OTHER SERVICES Financial Services Online www.leads.financialservicesonline. com.au page 19

LENDER Citibank Mortgages 1300 651 059 www.mortgagebroker.citibank.com.au page 32 Homeloans Ltd 1300 787 866 www.homeloans.com.au page 21

www.residex.com.au The House Price Information People

Residex 1300 139 775 www.residex.com.au page 23

ING Direct introducer.ingdirect.com.au page 11

Trailerhomes 0417 392 132 page 26

Liberty Financial 13 11 80 www.liberty.com.au page 3

SHORT TERM LENDER Mango Media 02 9555 7073 www.mangomedia.com.au page 1

MKM Capital 1300 762 151 www.mkmcapital.com.au page 2

NCF Financial Services Pty Ltd 1300 550 707 www.ncf1.com.au page 8

Provident Capital 1800 668 008 www.providentcapital.com.au broker@providentcapital.com.au page 4 RAMS Home Loans 1300 130 769 www.ramsbroker.com.au page 7

To advertise in Australian Broker, Call Simon Kerslake on +61 2 8437 4786